Economics 2281 · O Level · Price elasticity of supply (PES)
Price elasticity of supply (PES) — practice question
In England, football stadiums are generally constructed and paid for by the private sector, whereas in some countries the state builds and funds them. On match days, many football stadiums in the English Premier League are full. In the short run, the supply of seats is perfectly inelastic. The clubs could, in fact, increase prices, still sell their tickets and therefore increase their profits. Premier League footballers currently earn very high wages.
(a)[2]
Define what is meant by perfectly inelastic supply.
(b)[4]
Explain two reasons why a firm might not try to earn maximum profit.
(c)[6]
Analyse why Premier League footballers are paid very high wages.
(d)[8]
Discuss whether a government should use some of its tax revenue to build sports stadiums.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A price change leaves supply unchanged” …